Will Thailand’s Continued Political Instability Hamstring Its Economic Recovery?

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Will Thailand’s Continued Political Instability Hamstring Its Economic Recovery?

Three high-profile political court cases threaten to push the country into a new cycle of domestic political conflict.

Will Thailand’s Continued Political Instability Hamstring Its Economic Recovery?
Credit: Photo 266064497 © Mykhailo Polenok |

On Monday, Reuters reported that Thailand’s main stock index had dropped to its lowest level in three-and-a-half years. According to the report, this capped off a year in which it has been Asia’s worst-performing market, falling by 6.9 percent since the start of 2024.

The Reuters report linked the stock market slump to the three crucial court rulings that could potentially send tremors across the country’s political landscape, “raising tensions between the powerful conservative, royalist camp and their rivals.”

The first case, which was heard by the Constitutional Court today, concerns a petition calling for the dissolution of the opposition Move Forward Party (MFP), which won last year’s general election on a progressive platform that included promises to reduce the power of Thailand’s political and business establishment.

The petition was filed last month by the Election Commission and argues that the party’s promise to reform Article 112 of the Thai penal code – often called the lese-majeste law – which criminalizes any criticism of the monarchy. Circularly, the complaint was filed based on an earlier Constitutional Court ruling that the MFP’s reform pledge amounted to a call for the overthrow of Thailand’s political system. After deliberating on the case today, the Court announced that it would reconvene for a further hearing on June 18.

The second case involves Prime Minister Srettha Thavisin, who could be removed from office for ethics violations. In May, 40 military-appointed senators filed a complaint against Srettha, alleging that he breached the constitution in appointing a cabinet member who was once convicted for attempting to bribe members of the Supreme Court. The Constitutional Court subsequently accepted the complaint but ruled that Srettha could remain in office until its decision is handed down. It has announced that the first hearing in the case will take place on June 18.

Meanwhile, former Prime Minister Thaksin Shinawatra, the de facto leader of Srettha’s Pheu Thai Party, is set to appear in a separate court, also on June 18, to be indicted formally on lese-majeste charges. The lese-majeste complaint was filed by royalist activists in 2016, relating to an interview that Thaksin gave the year before to South Korea’s Chosun Ilbo newspaper, in which he alleged that the Privy Council had backed the May 2014 coup that ousted his sister Yingluck Shinawatra’s government.

All three of these cases are instances of Thailand’s conservative political establishment, which includes the monarchy, military, and administrative apparatus, closing ranks to prevent the emergence of any serious opposition to its rule.

Whether or not the Constitutional Court votes to dissolve the MFP, the case against it is intended to keep the party off balance and prevent it from being able to mount another, more serious challenge at the ballot box. The cases involving Srettha and Thaksin, meanwhile, are likely intended to reinforce the terms of the political pact that allowed Thaksin to return to Thailand after more than 15 years in self-exile.

The former leader was allowed to return after Pheu Thai agreed to abandon the MFP and form a coalition government with military-backed and conservative parties – the very forces with which Thaksin and his proxy parties had long been locked in bitter political combat. The unspoken purpose of this pact was to deal Thaksin back into the game of Thai politics, and to allow the conservative establishment to focus on thwarting the ascendant MFP, which articulated a more threatening critique of prevailing power arrangements.

With the cases against the two Pheu Thai leaders, the Thai establishment is expressing its discontent about Thaksin’s recent political activities, and sending the message that there are limits to its pact with the party.

However, proving a link between political instability and the state of the Thai economy is far from straightforward. The country’s economy has been remarkably durable, thriving despite multiple coups d’etat and raucous street protests.

One Thai study of this question published in 2018 concluded that “the degree of the economic impact and statistical significance on different components of [the] macroeconomy is quite varied, reflecting complicated interaction between political factors and economic outcome.” It is also true that the country’s current economic problems have deeper structural causes, some dating back to the Asian financial crisis of 1997-1998.

At the same time, the political uncertainty created by these court cases – Srettha’s removal, in particular, would usher in “at least two months” of political negotiation and coalition-building – is doing the country’s anemic economy no favors. At the very least, Thailand’s continuing political uncertainty is hamstringing its long recovery from the COVID-19 pandemic. During the protracted deadlock that followed the May 2023 election, the business community warned that it could impact foreign investment particularly.

“The longer they spend, the more adverse the effect on the Thai economic recovery, as it would cut confidence among investors and weigh on new foreign investment,” Sanan Angubolkul, chairman of the Thai Chamber of Commerce, told Nikkei Asia.

While foreign investors have long prized Thailand for its macroeconomic stability, the country’s relative economic advantages over neighbors like Vietnam, Indonesia, and the Philippines have eroded in recent decades, making the downsides more apparent. The Thai economy grew by an estimated 2.5 percent in 2023, the lowest in Southeast Asia after Myanmar.

Meanwhile, the abolition of the MFP, Thailand’s largest opposition party – and one that has only become more popular since last year’s opposition – could “affect confidence in the country, its democratic system, and political parties,” the party’s former leader Pita Limjaroenrat said over the weekend.

While Pita may be overestimating how sensitive investors are to indices of democracy and political freedom, they may be more worried about the dissolution of the MFP prompting a return to destabilizing street protests. The abolition in February 2020 of the MFP’s predecessor, Future Forward, was one of the major catalysts for the anti-government protests of 2020 and 2021, which saw youth activists voice for the first time in many years open criticisms of the “network monarchy” that underpins Thailand’s lopsided concentrations of wealth and power.

The annulment of the votes of more than 14 million Thais will no doubt bring a political reaction of some kind, if not now then at the next general election. As I argued earlier this week, dissolving the MFP could only lead to the emergence of a more popular – and radical alternative, almost guaranteeing further political interventions and crises as the decade drags on.

All of this suggests that for Thailand’s political establishment, the economy remains an important concern, but a secondary one next to the imperative of safeguarding their preferential political role and ability to act as self-appointed political stewards. Due to its sound macroeconomic management, Thailand has managed to avoid paying a price for its chronic political instability, but there is no guarantee that it can continue to do so indefinitely.